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WaveDancer Releases Second Quarter 2022 Results

·9 min read
WaveDancer, Inc.
WaveDancer, Inc.

$500,000 of Revenue Recognized from Blockchain Platform Development as Company Nears Full Production; Revenue up 44% from First Quarter

FAIRFAX, Va., Aug. 15, 2022 (GLOBE NEWSWIRE) -- WaveDancer (NASDAQ: WAVD), reported its results for the second quarter ended June 30, 2022, which was characterized by continued investment in its software development team and strategic efforts focused on maintaining and growing profitability in the Company’s professional services work. The Company recognized significant revenues after achieving substantial project milestones on their key United States government contract to bring a blockchain-enabled supply chain and logistics platform into full production.

WaveDancer CEO Jamie Benoit commented, “The various investments we have made in WaveDancer are helping establish a strong foundation for growth. Our revenue has increased 44% from first quarter levels, while our gross profit has increased by 147%, in part due to the significant revenue recognized by our United States Government contracts. As we drive aggressively toward Authority to Operate our supply chain platform with our government customer, we are simultaneously readying our Maverix product for the broader commercial markets.”

Mr. Benoit continued, “Our focus on higher margin professional service opportunities, which resulted in our second quarter gross margin expanding to 30.9%, will continue in following quarters and establish a strong foundation upon which we can continue with our long-term strategic transformation into a leading technology company. I am optimistic, based on the strong interest we are hearing from customers, that our blockchain offering meets a large demand in the marketplace and am likewise optimistic about acquisition opportunities that will be immediately accretive.”

WaveDancer CFO Tim Hannon added, “The increase in expenses this quarter, in comparison to last year, was driven in part by one-time professional fees and other costs to conduct due diligence related to our intended acquisition of Knowmadics. The dramatic change in market sentiment during the first half of 2022 that made closing the transaction impossible was unfortunate, but ultimately in the best interests of our shareholders. Our strategic focus on profitability and investment in product development will ultimately allow us to emerge stronger and better positioned for the massive growth we expect in the blockchain and zero trust sector.”

Second Quarter 2022 Key Financial Items (all comparisons to prior year period unless otherwise noted)

  • Total revenues decreased 8.8% to $4.3 million, compared with $4.7 million.

  • Professional fees decreased 14.5% to $2.8 million down from $3.3 million.

  • Gross profit decreased slightly to $0.93 million, compared with $0.96 million.

  • Gross margin expanded to 30.9%; higher-margin professional fees accounted for 65.9% of revenues.

  • Net loss of $(1.5) million, compared with net income of $0.04 million.

  • Adjusted EBITDA1 of ($1.4) million, compared with $0.6 million

Six Months 2022 Key Financial Items (all comparisons to prior year period unless otherwise noted)

  • Total revenues decreased to $7.3 million, compared with $8.2 million.

  • Professional fees decreased to $4.9 million down from $5.8 million

  • Gross margin improved significantly, increasing to 25.1%, compared with 24.2%; higher-margin professional fees accounted for 67.2% of revenues.

  • Net loss of ($3.6) million, compared with a net income of $0.3 million

  • Adjusted EBITDA of ($3.0) million, compared with $0.05 million.

About WaveDancer
WaveDancer (www.wavedancer.com), headquartered in Fairfax, Virginia, is a provider of zero trust software solutions, specializing in secure blockchain supply chain management (SCM), asset tracking and security. Our technologies are deployed and being used to help organizations manage very complex supply chain challenges. Initially developed to secure a complex international supply chain for a global U.S. Government (USG) national security organization, the technology has matured to address multiple operational capabilities. Customers are using the WaveDancer platform to gain unprecedented levels of accountability, auditability, and predictability from their data, while giving insights to their partners and suppliers through a controlled, distributed ledger that is immutable and can be trusted by all parties. The sophisticated blockchain technology is now available to the entirety of the USG through GovCloud.

Additional information for investors
This release may contain forward-looking statements regarding the Company's business, customer prospects, or other factors that may affect future earnings or financial results. Such statements involve risks and uncertainties which could cause actual results to vary materially from those expressed in the forward-looking statements. Investors should read and understand the risk factors detailed in the Company's 10-K for the fiscal year ended December 31, 2021 and in other filings with the Securities and Exchange Commission.

For additional information contact:
Jeremy Hellman, CFA
Vice President
The Equity Group
(212) 836-9626
jhellman@equityny.com

1 Please see non-GAAP reconciliation on page 6

WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
Unaudited

 

 

Three Months Ended
June 30,

 

 

 


2022

 

 

 

2021

 

 

Revenues

 

 

 

 

 

 

 

 

Professional fees

 

$

2,844,694

 

 

 

$

3,328,274

 

 

Software sales

 

 

1,472,688

 

 

 

 

1,403,687

 

 

Total revenues

 

 

4,317,382

 

 

 

 

4,731,961

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Cost of professional fees

 

 

1,965,611

 

 

 

 

2,397,895

 

 

Cost of software sales

 

 

1,421,990

 

 

 

 

1,378,138

 

 

Total cost of revenues

 

 

3,387,601

 

 

 

 

3,776,033

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

929,781

 

 

 

 

955,928

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

3,240,388

 

 

 

 

819,193

 

 

Acquisition costs

 

 

356,159

 

 

 

 

82,756

 

 

Change in fair value of contingent consideration

 

 

(942,609

)

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(1,724,157

)

 

 

 

53,979

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(19,818

)

 

 

 

(15,226

)

 

Other income (expense), net

 

 

195

 

 

 

 

4,404

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

 

(1,743,780

)

 

 

 

43,157

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

218,338

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(1,525,442

)

 

 

$

43,157

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(1,525,442

)

 

 

$

43,157

 

 

 

 

 

 

 

 

 

 

 

Basic (loss)/earnings per share

 

$

(0.09

)

 

 

$

-

 

 

Diluted (loss)/earnings per share

 

$

(0.09

)

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

17,376,697

 

 

 

 

11,980,397

 

 

Diluted

 

 

17,376,697

 

 

 

 

12,665,267

 

 


WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
Unaudited

 

 

Six Months Ended
June 30,

 

 

 


2022

 

 

 

2021

 

 

Revenues

 

 

 

 

 

 

 

 

Professional fees

 

$

4,911,384

 

 

 

$

5,767,533

 

 

Software sales

 

 

2,401,510

 

 

 

 

2,384,008

 

 

Total revenues

 

 

7,312,894

 

 

 

 

8,151,541

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

Cost of professional fees

 

 

3,677,626

 

 

 

 

3,865,594

 

 

Cost of software sales

 

 

2,329,422

 

 

 

 

2,310,369

 

 

Total cost of revenues

 

 

6,007,048

 

 

 

 

6,175,963

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

1,305,846

 

 

 

 

1,975,578

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

5,954,730

 

 

 

 

1,499,443

 

 

Acquisition costs

 

 

790,861

 

 

 

 

153,286

 

 

Change in fair value of contingent consideration

 

 

(930,000

)

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

 

(4,509,745

)

 

 

 

322,849

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(39,137

)

 

 

 

(16,684

)

)

Other income (expense), net

 

 

789

 

 

 

 

7,807

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

 

(4,548,093

)

 

 

 

313,972

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

944,344

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,603,749

)

 

 

$

313,972

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(3,603,749

)

 

 

$

313,972

 

 

 

 

 

 

 

 

 

 

 

Basic (loss)/earnings per share

 

$

(0.21

)

 

 

$

0.03

 

 

Diluted (loss)/earnings per share

 

$

(0.21

)

 

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

17,335,979

 

 

 

 

11,633,464

 

 

Diluted

 

 

17,335,979

 

 

 

 

12,305,182

 

 

WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

Unaudited
June 30, 2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

578,982

 

 

 

$

4,931,302

 

 

Accounts receivable

 

 

 

3,583,136

 

 

 

 

1,664,862

 

 

Prepaid expenses and other current assets

 

 

 

298,179

 

 

 

 

276,990

 

 

Total current assets

 

 

 

4,460,297

 

 

 

 

6,873,154

 

 

 

 

 

 

 

 

 

 

 

Intangible assets, net of accumulated amortization of $900,818 and $201,032

 

 

 

7,349,182

 

 

 

 

8,048,968

 

 

Goodwill

 

 

 

7,585,269

 

 

 

 

7,585,269

 

 

Right-of-use operating lease asset

 

 

 

582,500

 

 

 

 

672,896

 

 

Property and equipment, net of accumulated depreciation and amortization
of $374,185 and $347,886

 

 

 

109,990

 

 

 

 



105,256

 

 

Other assets

 

 

 

77,100

 

 

 

 

77,100

 

 

Total assets

 

$

 

20,164,338

 

 

 

$

23,362,643

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

1,546,945

 

 

 

$

650,499

 

 

Accrued payroll and related liabilities

 

 

 

721,927

 

 

 

 

524,055

 

 

Commissions payable

 

 

 

250,227

 

 

 

 

224,250

 

 

Other accrued liabilities

 

 

 

562,428

 

 

 

 

204,080

 

 

Contract liabilities

 

 

 

165,843

 

 

 

 

186,835

 

 

Operating lease liability- current

 

 

 

199,553

 

 

 

 

192,128

 

 

Total current liabilities

 

 

 

3,446,923

 

 

 

 

1,981,847

 

 

 

 

 

 

 

 

 

 

 

Operating lease liability - non-current

 

 

 

405,763

 

 

 

 

507,120

 

 

Deferred income taxes

 

 

 

223,160

 

 

 

 

1,167,504

 

 

Other liabilities

 

 

 

1,374,137

 

 

 

 

2,265,000

 

 

Total liabilities

 

 

 

5,449,983

 

 

 

 

5,921,471

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock at $0.001 and $0.01 par value; 100,000,000 shares authorized, 19,039,313 and 18,882,313 shares issued,
17,396,697 and 17,239,697 shares outstanding, as of
June 30,2022 and December 31, 2021, respectively

 

 

 







           19,039

 

 

 

 







            18,882

 

 

Additional paid-in capital

 

 

 

32,666,239

 

 

 

 

31,789,464

 

 

Accumulated deficit

 

 

 

(17,040,712

)

 

 

 

(13,436,963

)

 

Treasury stock, 1,642,616 shares at cost

 

 

 

(930,211

)

 

 

 

(930,211

)

 

Total stockholders' equity

 

 

 

14,714,355

 

 

 

 

17,441,172

 

 

Total liabilities and stockholders' equity

 

$

 

20,164,338

 

 

 

$

23,362,643

 

 

Non-GAAP Financial Measures
In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measure is Adjusted EBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization expense, net interest expense (income), and taxes, as further adjusted to eliminate the impact of, when applicable, expenses that are unusual or non-recurring that we believe do not reflect our core operating results. and non-cash stock-based compensation. We believe that Adjusted EBITDA is meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Our calculation of Adjusted EBITDA, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income (loss) calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income (loss) to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

Reconciliation of Net (loss) income to Adjusted EBITDA (Unaudited)

 

 

 

 

 

Three months ended

Six months ended

(in thousands)

June 30,

June 30,

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

Net (loss) income

$

(1,525

)

 

$

314

 

$

(3,604

)

 

$

43

Adjustments:

 

 

 

 

 

 

 

Interest expense (income), net

 

20

 

 

 

11

 

 

38

 

 

 

9

Income taxes

 

(218

)

 

 

-

 

 

(944

)

 

 

-

Depreciation

 

13

 

 

 

7

 

 

26

 

 

 

12

Amortization

 

350

 

 

 

-

 

 

700

 

 

 

44

EBITDA

 

(1,360

)

 

 

332

 

 

(3,784

)

 

 

108

Non-cash stock-based compensation

 

530

 

 

 

112

 

 

842

 

 

 

140

Acquisition Costs

 

356

 

 

 

71

 

 

791

 

 

 

153

Change in FV of earnout

 

(943

)

 

 

-

 

 

(930

)

 

 

-

Post-employment agreement

 

-

 

 

 

36

 

 

-

 

 

 

71

Moving expense

 

-

 

 

 

8

 

 

-

 

 

 

8

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

(1,417

)

 

$

559

 

$

(3,081

)

 

$

480